The Government’s second tranche of super changes include the draft laws for the 5 year concessional contributions cap “catch up measure”. This measure is designed to allow members to use unused concessional contributions caps from the previous 5 years provided that a member’s account balance is less than $500K at the prior year’s 30 June. Like the $1.6 million pension cap measure, the 5 year catch up measure will bring in a new level of complication into the super system.
Areas worth noting in the draft laws include:
- The measure commences from 1 July 2018, but in practice can only be used from the 2018/19 year onwards as that will be the first year in which there will be unused concessional contributions caps
- The new concept of “total superannuation balance” is introduced to measure the $500K benefit limit
- The total superannuation balance will be made up of a member’s “accumulation phase value”, “transfer balance account” and “roll-over superannuation benefit”
This catch up measure, while complicated, is a welcome change. It could be particularly helpful for members who have a spike in assessable income for a particular year (for example, because of a capital gain or a bonus) or for persons with low super balances looking to top up their super in a tax effective manner.
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